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Dow Jones Earnings to Offer Insight on Global Growth & Trade Wars

Dow Jones Earnings to Offer Insight on Global Growth & Trade Wars

Peter Hanks, Strategist

Dow Jones Forecast:

Dow Jones Forecast: Index to Take Cues from Major Earnings Reports

The Dow Jones climbed near record highs on Tuesday after it was revealed US negotiators would travel to Beijing next week in an attempt to resolve the ongoing trade dispute. The resultant optimism bolstered the Average following a string of mixed earnings from companies like Coca Cola (KO) and Lockheed Martin (LMT). As Wednesday approaches, Caterpillar, UPS and Boeing will take position as the Industrial Average’s key corporate influencers.

Dow Jones Earnings to Offer Insight on Global Growth & Trade Wars

Caterpillar to Offer Insight on Global Growth

Caterpillar is often viewed as a bellwether for the global economy as investors view heavy machinery demand as an indicator for construction activity and therefore growth. With that said, CAT warned last quarter of waning demand in China – which aligned with slowing growth in the country – alongside increased competition in Asia. The headwinds conjoined to pressure the machinery manufacturer lower and shares have made little progress in the quarter since.

Caterpillar (CAT) Stock Price Chart: Daily Time Frame (October 2018 – July 2019) (Chart 1)

CAT stock price after earnings

Implied volatility for CAT shares is expectedly heightened ahead of earnings, with options pricing suggesting a 4.6% move in either direction. Coincidentally, the implied price range encompasses two key technical levels at each end of the range. To the topside, a descending trendline from January 2018 will look to keep a lid on CAT shares around $143 – where it collides with a nearby Fibonacci level. Conversely, Caterpillar shares will look to the 200-day moving average around $132 for support if earnings seriously disappoint.

UPS & Boeing Earnings to Highlight Trade Wars

While Caterpillar will offer useful information on the state of global growth, United Parcel Service (UPS) and Boeing (BA) are likely to deliver updates on the state of another headwind facing equity markets – trade wars. That said, each stock faces a different challenge under the umbrella of the larger theme.

UPS

The revenue of United Parcel Service is largely tied to global shipping and package delivery trends. Thus, lower economic activity due to slowing growth or widespread trade conflicts will look to weigh on the company’s profit. UPS leadership will likely offer commentary on both these themes and their respective outlooks.

UPS Stock Price Chart: Daily Time Frame (January 2018 – July 2019) (Chart 2)

UPS stock price after earnings report

Boeing & Airbus Debacle Continues

Dow Jones heavyweight – Boeing (BA) – faces a much more specific trade war threat as the EU and United States continue to lobby for their respective airplane manufacturer at the WTO. An exchange of tariffs and counter-tariffs have seen two of the world’s largest economies trapped in a trade conflict spanning months. After facing another round of potential tariffs from the United States, the European Union has expressed a willingness to respond by placing levies on goods with close ties to President Trump’s base. For more information on this conflict, follow @PeterHanksFXon Twitter.

Alongside the issues with the European Union, Boeing continues to grasp for an answer to the issue in its 737 Max models which resulted in two fatal crashes. Just last week, Boeing announced a $4.9 billion payment associated with the grounding of the model. As long as the 737 Max remains unfit for flight, airlines will seek compensation for lost profit. In summation, BA faces a series of headwinds and as the largest member of the Dow Jones, could put significant pressure on the Index if results disappoint.

Boeing (BA) Stock Price Chart: Daily Time Frame (January – July) (Chart 3)

boeing stock price chart earnings

Perhaps to the chagrin of bears, Boeing stock enjoys a nearby confluence of support in the $365 area marked by the 200-day moving average and ascending trendline from June. While fundamental themes will remain the primary drivers behind the stock’s price action, technical levels will look to exert any influence they can muster in an attempt to stall price in either direction. As these three large-cap stocks look to flex their muscle over the broader Dow Jones Index, check out the weekly technical forecast for the Dow Jones, Nasdaq 100 and DAX 30 for important price levels.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Dow Jones, Nasdaq 100, DAX 30, FTSE 100 Technical Forecast

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